14.1 The term 'dual-use goods' covers goods
and technologies which are primarily intended for civil applications,
but which may be used for military purposes, or which could significantly
enhance the military capacities of the countries acquiring them.
Before 1995, Member States controlled the exports of these goods
under national legislation, taking into account both national
policy considerations and international agreements. In 1995, a
new system was put in place under a Council Regulation on licensing
and administrative co-operation and a Council Decision containing
lists of controlled products and an indicative list of countries
for which simplified licensing procedures may be applied by Member
States. It was agreed that the regime would be reviewed after
two years.

14.2 In May 1998, the Commission concluded,
having carried out the review, that the regime was too complex
and cumbersome. It proposed[22]
a new draft Regulation designed to simplify and strengthen the
system, so as to facilitate legitimate trade while respecting
the international commitments and responsibility of Member States
and the Community. This involved in particular changing the legal
structure from a Community Regulation supplemented by a Common
Foreign and Security Policy Decision to a single-pillar Regulation
under Article 133 (formerly Article 113); creating a Community
General Export Authorisation; introducing a military end-use control;
bringing under control certain transfers of technology by electronic
means; reducing licensing requirements for intra-Community trade;
and reinforcing administrative co-operation.

14.3 We considered the proposal on 3 February
1999, after the Government submitted a very belated Explanatory
Memorandum on it at our request, and again on 19 May 1999, when
we cleared it. We were subsequently told, in an Explanatory Memorandum
of 12 April 2000, that the then Portuguese Presidency had tabled
a revised version[23]
of the draft Regulation, and we understand that, after further
discussion in the Council, the proposal  which we had cleared
at our meeting on 19 April 2000  was adopted on 22 June
2000 as Council Regulation (EC) No. 1334/2000.

The current proposal

14.4 As noted above, one of the aims of
the new Regulation was to reduce the licensing requirement for
intra-Community trade, but it nevertheless specified that, in
order to enable Member States and the Community to comply with
their international commitments, authorisation should be required
for such trade in the case of certain items, including all nuclear
materials, facilities and equipment, considered to present a risk.
However, the Commission says that it has since become apparent
that these controls are hampering intra-Community trade in non-sensitive
nuclear products, and it also points out that, under the Euratom
Treaty, it already has an obligation to inform the International
Atomic Energy Authority of intra-Community transfers of nuclear
materials. Consequently, although it considered that controls
over sensitive materials should be maintained, it took the view
that those over non-sensitive products are both superfluous and
incompatible with the principle of free movement. In particular,
it proposed that controls over intra-Community trade should be
removed (i) for natural or depleted uranium or thorium (or any
other material containing one or more of them), and (ii) for special
fissile materials, other than separated plutonium and uranium
enriched in the isotopes 235 or 233 to more than 20%.

The Government's view

14.5 In his letter of 19 December 2000,
the Parliamentary Under-Secretary of State for Consumers and Corporate
Affairs at the Department of Trade and Industry (Dr Kim Howells)
told us that, although there had previously been discussion on
this question in an ad hoc Council working group, no consensus
had been reached by Member States prior to the presentation of
this proposal, which was not circulated to them until 6 December.
He said that this was too late to submit an agreed Explanatory
Memorandum to the two Parliamentary Scrutiny Committees before
the final adoption of the proposal by the Council on 22 December,
and that, since the UK was amongst the "most ardent"
supporters of the amendment, any delay to its adoption would have
been undesirable. He did, however, promise to submit an Explanatory
Memorandum "shortly". This he did on 22 December, though
the Memorandum did not in fact add greatly to what had been said
in his earlier letter, other than to make the point that the Regulation
applying prior to the adoption of Regulation 1334/2000 did not
require the authorisation of intra-Community transfers of these
items.

Conclusion

14.6 As with the original proposal leading
to the adoption of Regulation 1334/2000, we find it unsatisfactory
to be confronted with a situation where a proposal has already
been adopted by the Council, and, even though we recognise the
tight timetable to which the department was operating in this
instance, we consider that more strenuous efforts could, and should,
have been made to enable us to look at the proposal properly prior
to its adoption.

14.7 So far as the substance of the proposal
is concerned, we find it difficult in such a specialised and technical
area as this to form any clear view, other than to conclude that
the proposal is of obvious political importance, and thus one
which needs to be reported to the House. On that basis, and on
the strength of the information provided by the Government, we
are clearing it.